Karen Howard - IR, Kei Advisors LLC Hans Sack - President Kent Rockwell - Chairman and Chief Executive Officer Brian Smith - Chief Financial Officer & Treasurer.

Ben Hearnsberger - Stephens Inc Saliq Khan - Imperial Capital Sherri Scribner - Deutsche Bank Jason North - Jefferies Patrick Newton - Stifel.

Greetings, and welcome to The ExOne Company’s Third Quarter 2015 Financial Results Conference. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Miss.

Karen Howard, Investor Relations for The ExOne Company. Thank you, you may begin..

Thank you, Donna, and good morning, everyone. We certainly appreciate your time today for our third quarter and year-to-date 2015 financial results conference call.

On the call with me this morning are Kent Rockwell, Chairman and Chief Executive Officer, Hans Sack, our President; and Brian Smith, our Chief Financial Officer and Treasurer of the company. They will be reviewing the results for the third quarter that were published in the press release distributed after yesterday’s market close.

If you don't have that release, it’s available on our website at www.exone.com. The slides that will accompany our discussion today are posted there as well. Referring to the slide deck, on Slide 2 is the Safe Harbor statement. As you may be aware, we will make some forward-looking statements during this discussion and may also during the Q&A.

These statements apply to future events and are subject to risks and uncertainties, as well as other factors that could cause actual results to differ materially from what is stated here today.

These risks and uncertainties and other factors are provided in the earnings release, as well as documents filed by the company with the Securities and Exchange Commission. These documents can be found at the company's website or at www.sec.gov.

Kent will provide a strategic perspective, Hans will review our operational progress during the third quarter and Brian will provide a detailed review of the financial results. Then we’ll turn it back to Kent to close before we open up the line for Q&A. And with that, I turn it over to you, Kent..

Thank you Karen and good morning to all our participants.

Good morning again and thanks for joining us before Hans and Brian get involved in Q3, I’m going to spend a few minutes and take you through you know how we are positioned to achieve our growth objectives even though we’ve run into an issue of revenue deferrals on certain large machine sales and how all that’s going to play out for us.

The first slide is really something I had pulled from I think you can see there Steve Denning -- in at Harvard, because I think it’s very very fully reflective of what we’re trying to achieve at ExOne.

We embraced this approach of the significance of customer as the center of our universe and the need to satisfy their customer’s needs as an emerging growth company.

If we are going to be able to achieve future sales, repetitive sales, then we’ve got to satisfy these initial orders as we get into the large machine categories and so, it’s very important that everybody understand their customer centric nature of what we are doing.

Now moving to the second slide, the customer demand for growth in the non-machine sector, we reported two revenue streams non-machine and machine, and the trend get this again on a clear perspective. We have from the outset of the underwriting demonstrated a completely positive growth rate through the 2013 through 2015 period.

That growth rates is in excess of 20%, its comprised of all the non-machine sales, such things as the PSC performance to consumables services and other activities.

The margin contribution on those revenues is they are growing overtime, it is because there is a high, indirect expense associated with the things such as the PSCs, you have to get to higher levels of revenue to really get the incremental margin flowing through as a contribution margin beyond breakeven and a PSC is about 75%.

And, but you’ve got to get up to the breakeven levels or beyond in order to get some of that. We are now starting to experience it more with the growth that we are seeing.

This growth comes by the way with considerable price reductions in certain parts of our PSC, pricing and our consumables pricing in efforts to meet increased demands and the fact that our industrial based customers are much more rational than some of the consumer customers that you see in some of the other 3D printing businesses and that we have to be able to give our customers a total solution, and that total solution means rational pricing and continuously locating for improved pricing methodology since we improved the consumables and services that are applied into this business.

But we are very pleased with this. I think it speaks through itself that it’s been growing well and the opportunity for a huge margin in our non-machine business is quite positive. The next slide is talking about the emerging growth in direct printing machines.

Direct printing, as you know is the direct printing of metals as opposed to the indirect printing which is the sand molds and the casting technologies in the larger machines. This business is growing.

We started it, I believe over the long run and I said this in the past that direct printing machines will ultimately overtake the indirect machines and total volumes but that’s something that’s really a couple of years out.

It’s very exciting when you look at the customers that we are working with right now on the applications they are serving and who they are and how they are using these machines because we’re finding that binder jetting has a very very clear position in direct metals and the customers are certainly reflecting increased interest in this activity.

The column to the right 2015 is a year-to-date number we had the machines that we are selling in the fourth quarter where we’ll receive 14, so you do have a positive growth rate there.

Our margins in small machines are similar to our margins in the larger machines, accepting for the fact that the contribution of that margin is much smaller because the average selling price of our direct printing machines is much much lower than the large machines in indirect. So, I’m enthusiastic about this business.

The R&D revenues that we are starting to get from customers for new applications is very gratifying.

Hans is going to address this a little bit, so I’m not going to dwell on it too much more, but it is an incubative business, but it is growing and the opportunities that are popping out of it, I believe represent multimillion dollar opportunities this week can close them out in the development phase again through the next 24 months.

So if indirect business, excuse me if the direct machine business is so good and the non-machine business is -- why is ExOne seen to be having performance issues? And it all becomes quite clear that it all evolves around the delivery of the large indirect printing machines.

There is two issues that are impacting us in the large machines, and I’m going to cover this in the next couple of slides. The large machine recognition has been pushed out lowering our performance objectives in 2015.

There is a variety of reasons for that and most of it has to do with customer deferrals for issues such as getting their buildings done.

I can’t tell you how many customers we have that would be Fortune 100 customers that have given us a delivery date and then said that the installation date is going to move from August to November, or from July to December while they get their buildings finished or whatever criteria that they are hanging up with.

But they are moving the delivery dates. Now we have been paid a good sum of money, we’ve gotten most of the purchase price at the time that these machines get shift we invoice and we should have you know 70% to 90% of our money collected. In some cases we collect all of them.

So in large machines we had the second issue, which is that in August the currency devaluations hit our customer base very strongly.

If you recall that we constantly said we are a global company that 60 plus percent of our business comes out of Asia and Europe and the currency devaluations that hit for everybody stands still for a period of time, it cost us some orders that were deferred into 2016.

Russia, we had one large order that has moved into 2016, we did collect on one other Russian order in this so they didn’t go away.

But we have one large lease, very profitable lease that we would have been pleased to get done, and it was being done by an international bank with the Russians but then they couldn’t come up with the roubles [ph] to buy the euros and we priced in euros and that’s actually postponed, its nice to know that we did have a leasing company ready to do machine in Russia, so this is all positive but the currency was the main issue.

Largest currency issue was China. And literally the China represents 50% of the world casting business.

And so castings’ coming out of China is a very very major opportunity for us and we’ve been developing the Chinese market over the last year and we are expanding even now, but when the Chinese currency got hit, a lot of our customers stood there with their hands in their pockets that said, we need to wait and see or we need to go back and get more money because the money they are getting is quite often from some local agency or municipal agency or federal agency in China and they have to go back and renegotiate where they are getting their money, same thing you actually run into Russia.

Same thing can be said in India, although India did take the hit but they are trying to get anything done in India is always a rewarding experience dealing with matters of credit out of it, it’s been a nightmare. So there’s two factors that have caused large shipments to defer in collection.

Now, in direct printing you will see that two areas here are -- in direct printing because the application of those machines is for R&D prototyping applications. There is no real reason for them to be application specific as far as the indirect printers.

And so they are purchased by researches to through our or other powder companies that are looking to use our technology and it’s primarily going into an R&D venture.

The indirect printing, however as we moved from prototyping into production technology is in a very large extended time for acceptance of the machines and some of these machines again, most of them going into foreign countries and the contracts are written in foreign languages and quite often its about issues when do they accept.

And in each case, these machines because they are being applied to a production technology which is where we want them to go requires specific application support.

I might just quote one example, for instance, where we have a backlog of a couple of million dollars for machines that we are delivered in China, that actually paid in full, so we’ve gotten the entire sum from the company that acquired these machines. We did have to put up a 5% bond to finish the installation.

And they moved, this originally was supposed to be delivered in March. They moved it all the way to June. They deferred it -- the delivery a couple of times, finally the deliveries got there and then they delivered, then they delayed the installation, while they got their buildings finished.

These machines are now up in running and the final acceptances are just starting to occur, but they have got four machines and three are being installed and the contract says that all four have to be recognized but the demand for the use of those machines has slowed up a little bit in China and they are moving one of the machines to another location.

This is an important customer. This customer’s worth a lot of money, to as they are going to buy a lot more machines. They already own three more of our machines and you can’t just turn around and tell the customer, well, you’ve got to pay attention.

As far as they are concerned, they have paid in full, and they are more concerned about getting acceptance that they are worried about what revenue recognition means to some company in the United States. And so we’ve been -- you know we have to be supportive of the customers’ interest.

So the currency devaluation and then the deferral of some of these machines and revenue recognition are the two main items that have hit and I want to move to the next slide to kind of highlight that. In Q1, we shift three machines, in Q2 this is large machines, indirect machines.

We shift six machines; in Q3 we shift four machines that’s a total of 13. We’ve recognized one. If you go down and you look at the direct machines, you will notice in that same period we shift 14 and we were able to record 13. And that’s because we did not have this acceptance issue that is pounding us right now in the large indirect machines.

Now, did we have a problem, yeah sometimes we run into an issue where you know it’s taking a little bit longer to get the right binder combinations for the specific materials that they are printing because it is again very specific introduction application? But we have, I mean in the 165 machines that we have shift year-to-date in this company, we’ve never had a machine returned, we did not have an issue with customer saying we are not performing.

It’s just the time it takes to get acceptance from a lot of these foreign customers. We frankly don’t have quite this same issue in the U.S. although in the U.S. we seem to run with the same issue they don’t know how to finish their billings.

So, shipments are much more indicative of the customer adoption and if we had reported all 13 [ph] instead of just one of the indirect machines, we would have had probably $15 million. Now that’s still with us, it’s just in backlog and so you will notice it when Brian discusses backlog, but it’s a bump in the road in terms of our success.

The real important factor here I think is to recognize it in terms of total shipments we are exceeding where we were. You might go to the next slide; we do anticipate good sales in Q4. We are anticipating between 12 and 16 machines in the reported quarter, more of those are larger machines then there are smaller machines.

I think that that’s a -- and such smaller machines it’s like a $700,000, $800,000 machine as opposed to a $1.2 and then 3 on the bigger ones. So we are demonstrating growing customer adoption and confidence in our activity.

We do believe that we will ship historically more machines in 2015 then we did in 2014, and to the extent that they are pushed into 2016 it simply means that we have more revenue growth to experience in 2016 as long as we can keep the momentum growing.

So for us, while it’s been unfortunate that we did not recognize the magnitude of time it would take to get customers up and installed these customers they are installing machines today are customers that are going to be buying multiple machines in the future and that purchase cycle will be much less because of what we are doing today.

So we just bear with it, we bear down. We go after the customer’s success and I think that we are doing the right thing. There is a website on this last page that’s worthy of note if you want to take the time to go see it. This is a customer that we’ve worked at with multiple years.

They just put up a very very nice statement about how they have gone from prototyping to designing products for the aerospace industry in France.

And it took two years for them to make the shift from the prototyping machine that they have, they are now acquiring additional equipment from us, but I ask you to just take a look at their website because it says all the things that you would want to hear from a customer, that could probably provide other ones to you.

So with that, I’m going to turn it over to Hans and Brian and then I’ll make some closing comments.

Good morning. I would be giving you some highlights on ExOne’s operation. I’ll start with the same slide I let off within the last two meetings as a summary of our 2015 priorities. Regarding the adoption rate I will highlight our emphasis on customer centric approach.

This addresses where we are in the adoption process and I will have some comments on that development. Next, I will address briefly on continuing growth and PSC operations. Then I will address on our focus on metal project, primarily in the metal injection molding market. The last bullet point on the slide I’m going to talk about right now.

We are making good progress in improving our sales and service organization and there specifically we have intensified the cooperation of our various regional resources to bring them to bear on any of -- project anywhere in the world. We are implementing more specialization, meaning that we now have five people in the U.S.

focusing just on the PSC sales, whereas before it was a mix responsibility for PSC in Sweden. We have set aggressive targets for them, as well as for the machine sales side and have begun in more rigorous management approach. Both sales and service we have implementation CRM solution coupled with the service management package.

We expect those to substantially improve efficiency and effectiveness of our team. Going to slide 13, as we have evolved, we've had a conscious change of our attitude from a development focus through a customer-centric focus.

This change also is responsive to customers preferring diverse material binder system to broaden and increase the attractiveness of binder jetting. The reasons for those lines, customers wanting to stick what they're use to and the conventional processes and the desire to eliminate any post-processing thereby improving cost effectiveness.

Compliance with sustainability goals and performance demand such as speed, strength, surface finish and temperature resistance require the developments of specific application targeted by the system. We are committed to the development of the core portfolio of system to satisfy all customers demand. Let me turn to the PCS operation.

Our PSCs have continued to show solid growth in 2015 as Kent showed earlier. Our focus has been on production efficiency, meaning, process robustness, quality metric and equipment performance. Material cost reduction through supply chain management and localization of sources is having a positive impact on margin.

For example, on the metal side we were able to avoid doubling of price by a supplier and instead develop sources creating significant reduction. Since our last call with Sweden PCS has started up an alliance with the Foundry industry institute. Sweden has an impressive array of globally prominent industries despite being a relative small market.

In Texas, we have started operations of an S-Max dedicated to and on the sites of a custom. This arrangement is similar to a leasing arrangement and along with standard leases maybe the model for future expansion of our PSC operation. The ExCast business is progressing as well. Under the FARDS program we are continuing to supply aerospace cast.

$1.4 million of revenues will be realized in the first quarter of 2015 and in Q1, 2016 shift impacted by customer initiated change. In addition we're also booking various industrial orders usually for larger parts. Slide 15 in the interest of time, I'm going to skip these, because Kent already commented on the trend.

The trends are prototyping to production. You can review in this slide. Slide 16, this is a final slide. I will address our direct printing business. As you know our process has produced a hybrid metal, but infiltrating bronze into a stainless metric.

This limited the applicability for many industrial applications, where the material is acceptable we are seeing increased for various [Indiscernible] particularly in the consumer market. I consider as a breakthrough for the entry into true industrial application that we are making great progress on developing monolithic printed metal.

This not only creates parts of properties fully comparable with cast or part, but sales processing steps to make our process more competitive. Direct printing doesn't have to be metal. We have developed application in the ceramic and sand business where components are printed directly more as tools for non-foundry processing.

The latter could be forms for the laying up of composite of glass fiber. These applications are permanent in aerospace and we are at the point of marketing these products proactively. We feel very much and think with what appears to be a lot of press attending to the – at the moment to the future of metal printing.

We think we are well positioned to take advantage of this new market development. With that, I turn it over to Brian to review financial results..

Okay. Thanks, Hans. I appreciate that if we could -- please turn to page 18 or slide 18 there. Revenue for the quarter $8.9 million lead by non-machine, strong non-machine growth as well as a larger portion of our revenues.

That led to the Americas leading from a region perspective and that's because of the larger strong PSC-based that we have here in the U.S. Machine deferrals that Kent mentioned earlier impacted both Europe and Asia to a greater extent.

We continue to be impacted by OpEx and that about $0.5 million or 5% of revenues in the current queue and that's mainly Yen and Euro, those are the currencies that we would sell in overseas.

The slide 19, trailing 12, we've turn the corner, this we had with two quarters of decline in TTM, so we've turn the corner in TMMs at that $39.9 million, again, led by strong non-machine growth and our TTMs continue to be dominated here in the Americas largely due to some of the comments that Kent made around machine deferrals in both Europe and Asia.

If I could now turn to slide 20 you'll see the non-machine growth and we express some amounts in percentages and our quarterly growth was 20%, the FX impact on us was about 8%, so its about 28% quarter-over-quarter growth relative to non-machine, again across all of our – growth across all of our PCSs and we think that this shows strong customer adoption trends.

And if I can turn you to slide 21, as Kent indicated we shift nine machines in the quarter, five. Five were recognized. The rest fell into our backlog which is our next slide. Our deferred revenue which are really customer prepayments is $6.7 million at September 30, continues to grow.

Turn to slide 22, we've been asked by a number of you to begin to provide backlog. We were doing it annually. So, we made sure, we put some controls around our quarterly backlog amounts and developed a quarterly backlog for you at 09/30/15. We do track our backlog internally.

We have strong growth in orders in the current quarter, so that $13.2 million at 12/31/14 has now grown to $22.8 million in 09/30/15, those are all firm purchased orders and meeting our backlog requirements for disclosure.

If we could turn to slide 23, which is another breakdown of our revenue to show you quarter and nine months revenues for machine and non-machine. Slide 24, gross margin of 13% in the current quarters is really related to volume and mix. Our cost structure is established to support higher volume of revenue.

It's the model depended upon volume and we do get good returns when we get those volumes to offset our facility in other fixed cost. We've talked the number of quarters about inefficiencies related to the significant moves that we made in Q4 and impacting us in Q1 and Q2 as well as some of our ERP implementation from a gross cost of goods sold.

We are perspective. We got those substantially behind us. While we're seeing things that are not as efficient as we expect them to be. As we continue to grow in those facilities, we're not calling out any specific items in this quarter. We continue to be able to see and hope to experience improvements in that area.

Turning to slide 25, G&A as you could see we have significantly slowed down growth in our G&A at $5 million. We had ERP cost of about $200,000 in the quarter and we had bad debt recoveries of about $200,000 in a quarter. So they net it out. So, $5 million is a good solid run rate number for us.

If I can turn you to slide 26 on R&D, again, R&D leveling our – considering Q3 and Q4 we had some pretty significant material cost with the announcements in earlier this year of both Exerials and Innovent. We working on those machines and that's why those two quarters were higher.

This run rate of R&D at this level is largely absent some of those one-time items. Turning to slide 27, we did do impairment test in the quarter driven by the decline in market capitalization. During the third quarter we did our interim test recovery for goodwill and we recorded an impairment charge – non-cash impairment charge of $4.4 million.

Turning to slide 28, CapEx, if you remember last quarter I mentioned that we were trending higher in our CapEx up to those I had 6 to 7 and were trending towards the $7 million mark.

Because principally, because some of the leases that we're entering into we have revise that up to $8 million to $9 million, that's still running a solid $20 million behind the 2014 amounts.

And again our CapEx will be largely going forward will be largely related to leases or to the extend we would need more volume in one of our PSCs -- one of our machines in our PSCs, our large expansion projects are at least for our existing facilities were behind us. Slide 29, gives you a bridge.

Again, as I mentioned last quarter on CapEx while we spend cash of $4 million, we transferred about $3.5 million from inventory into CapEx either for leases that we entered into for our customer or for our own internal used machines. We generated $4.4 million of working capital.

Kent mentioned earlier the impact of customer prepayments as well as working down our AR offset by growing inventory which we are delivering to our customers, some of which is in the shipments we talked about, offset by the $16 million of cash absorbed in our net loss for the period. We end cash of $20.3 million.

Turning to slide 30, summary of our balance sheet, we continue with virtually no debt and the $20.3 million of cash at the end of September. Revising based on our revised revenue guidance we've reversed our cash projection down to $18 million to $22 million. It was $25 million to $30 million at the end of Q3 or earlier this year.

Now, we had announced, if you turn to slide 31, we had announced the five-year revolving credit facility funded through and entity of indirectly owned by Kent, that facility expandable to in accordion feature to $30 million under certain conditions.

This will – we expect this will help us facilitate leasing until we can get to a point where our leases can be accepted on a commercial basis. And we're getting closer to that.

We had – Kent mentioned, we had a leasing company involved on a commercial basis with one of our customers in Russia and while that didn't go through, it's beginning to prove out the commercial ability to lease these assets.

We have no draws in our cash at this point in time and we have no draws expected in our cash projection for year end for that facility. With that I will turn it back to Kent..

All right. We've already announced in the release that we've revised our guidance down to the 40 level in revenue.

We are adding to it non-machine shipments, because I think machine shipments is a better to know weather for the health of business going forward, again, if we had just taken the shipments that haven't been reported in the revenue which certainly will be above the revenues for 2014.

Gross margins impacted strictly by the fact that there are large machines on in and that's where the biggest jump in gross margin and if you added five more machines in there you'd be up in the high 20s, or low 30s without any trouble. SG&A, R&D that Brian already has spoken to. So, we'll now move to a more conservative stands.

All right, just quick look, shipments and backlog are the key metrics as we're looking at our performance now. We do anticipate follow on machine orders. We have a very active order book going right now, which promises to show good increases in both direct and indirect as we move into FY 2016.

Geographically speaking Asian demand is growing and that's much more dramatic. There's a good plan within China for really trying to facilitate some of the foundries facilities to maintain their market position as a worldwide casting supplier and the demand for those machines are in the 1000s over the next ten years.

And we're working hard to try and grab a good portion of that. I think that's moving okay. North American demand is slowly increasing.

We have not seen capital spending and I think there's been other articles beyond what I'm speaking to about that fact that capital spending in North American manufacturing facilities has been substandard compared to other places. Europe seems to be very consistent. We're seeing demand throughout the various European clienteles and in India.

Just closing out, we expect non-machine and machine shipments to demonstrate the acceptance of our binder jetting and we're getting some very, very positive comments about binder jetting being the winning technology from some very important customers. We are still being customer-centric as I said earlier.

The 2015 capital spending deferrals that we ended up seeing last in this year are not reflective of our technology's ability to satisfy customer's expectations and I think that's reflected almost clearly by the fact that almost in every case we didn't lose an order, we just have the customer go back to their banks and back to their own capital spending people talk about it.

So with that, we'll move to questions, please..

Thank you. The floor is now open for questions. [Operator Instructions]. Our first question is coming from Ben Hearnsberger of Stephens Inc. Please proceed with your questions..

Thanks for taking my question. This is Brandon in for Ben. I guess on the, starting off from a non-machine sales is the majority of the growth coming from the PSCs or from the material side of things or I guess how much is from each? Thanks..

Its stronger on the PSC side as we mentioned, some of our materials we've been working on getting some better supply contracts and passing some benefits on, so its more on the PSC side than the material side. Volume wise material size is growing also, but it's more in the parts.

And when we expect it, we expect it some pretty significant shipments in FARDS like this quarter. We didn't get it, because of the changes that the customer requested. It didn't cost us anything but it cost us a push back into the first quarter of 2016 or really we'd been even better in Q3..

So I think it is important to recognize those that we are consciously always investing in, means to reduce consumable costs and still maintain a reasonable margin. And we have done a lot of that and we've also reduce some of our pricing in PSCs, so the growth you're seeing is a lot more additional output. .

Yes. Thanks for the color. My next question is on the lease printers. How big of a percent of total sales do you see this in a long term and then how big in 2016? And then, can you just remind us of the margin profile there as well? Thanks..

The margin profile is not very different at all. In fact ones you place that CapEx in its all depreciation. It's offsetting it. So it’s cash positive, very cash positive and it's in the same type of range of our other machines. Kent, you want to talk about the program going forward..

Leasing is I think a very necessary alternative for us to employ in developing the market. And we do anticipate -- doing more leases. Our preference would be to find third-party financial solutions that would allow us to report this revenue.

When we talk about leases, we're only talking about those leases which are commercial viable third-party contract not a short one you know a one year leases in which we do some as well to help customers to find their requirements. But our leases are good profitable leases and we hold the same margin as in a sale on every instance.

So, it’s a good process for us. We intend to continue it. I would prefer to move it all to our side, but right now everybody still want you to guarantee that the residuals. Once you do that its not allow to go in the revenue recognition..

Okay. Understood. Thanks for the color..

Thank you. Our next question is coming from Saliq Khan of Imperial Capital. Please proceed with your questions..

Sure. Thank you. From the verbiage guys on the last earnings call, I got the sense that there was fair deal of machine sale visibility going into third quarter and that revenue recognition should have been less of a challenge.

What change you in the quarter and what is your outlook now over the next 12 months?.

Two things happened. First we had a $2 million of sales where the customer moved their installation time. And literally – two sales is $3 million, okay, so on in direct machines.

And as soon as they move their installation back to where they can't do an acceptance test, it moves in the Q4, that mean, we had one machine that was in the queue that we're all ready to ship and I believe they were to provide us a Letter of Credit and the Letter of Credit that they've provided it at the last hour was insufficient for us to accept it.

And so, we had to postpone that. And we had another machine that customer was still waiting for some consumables to finish their testing and it fell over and interestingly in Q4. So, it’s just little things that are bumping up. You can't go in and insult the customer over the fact that they take longer to adjust.

I saw on a call from Stratus, what they were saying, the average machine takes a year to get accepted for them and we would have thought that it took as much to get it done, but we're going to be customer-centric and say, okay, we want these people satisfied and that means, bumping into the next quarter and the scheme things that's very little relative to the rewards it come from making a dominant market position that we're presently working on..

Agree. I think from a recognition perspective it could really range from a couple of months all the way from 15, 16 months we've seen that previously as well.

As I'm looking at the fourth quarter I'm really ballparking number, the revenue looks to be somewhere around $15 million, $16 million fourth quarter together to about $40 million with the rest of the year, how much of that you would anticipate will from shipment June, May during the second quarter as oppose to those shipments made during the third quarter?.

Yes. I don't know that we put a number on it, I mean, it's so hard to say, we're going out to try and negotiate on some of these contracts where we've written year and year and a half ago in foreign countries. I mean, some of these things have actually extended out for 18 months.

And once you ship it there could be six to eight weeks on the water, then it could be tied up in customs and then you got – to get it in to a facility and get it installed. There are just some very, very lengthy things. And the stories are endless. I didn't want to start you how fractured there are but it seems to be consistent.

But it's amazing, how many people can seem to figure it out how they still building on..

One last question for you and then hop back in the queue.

As you were anticipating about 12 to 16 machines are shipped during the fourth quarter, could you talk about the mix of the machines that you're looking at, either predominantly the M-Flex or the M-Print machine or will it be more the higher price machine, the S-Max and the S-Print?.

As I said in my slide, the weight of the machines. When you ship 13 of them and you don't start to record them at some point and have recorded one.

If you started recording pretty soon something is wrong and frankly if there is nothing wrong we're just moving forward and we have more machines being recognize in the large category than we do in the direct printing category..

Thank you..

Thank you. Our next question is coming from Sherri Scribner of Deutsche Bank. Please proceed with your question..

Hi. Thank you. I just wanted to ask about the margin profile which you think about going forward and maybe just thinking about with the non-machine sales being so strong, can you help us think about how that margin is different for the non-machine business versus the machine business.

I assume those margins are better at least on the material side that maybe to serve these margins aren't quite as good as the printer margin.

Just trying to think through margins in terms of the deltas up and down as we move through the year with the machines sales maybe being delayed?.

Okay. Thanks, Sherri. This is Brian. Good question. Our variable costs are very low. Once we offset our fixed cost in our PSC we get a very strong margin relative to volumes and so it is PSC by PSC and it’s the amount of volume going through those. So our margins are improving in our PSCs as the volume continues to grow.

And I don't have a specific number of service, you would say they were lower. I would recognize that from anecdotally, but I don't have any specifics on that.

Relative to machines, we are built for volume and so as you see volumes increase you'll margin percentages increased significantly both and particularly because machines are so large and lumpy, you'll see margins increased significantly in periods of growth.

You can do math using Q3 in our year-end guidance get to a margin for Q4 and you'll see that significantly improved from the Q3 margin..

Should we think about printer margins is being higher than the corporate average or lower than the corporate average?.

I would think of them is higher..

Okay. And then, it doesn't seem like guys have a cash issue. You feel comfortable with your cash position for this year. You have enough to mange the business.

So I guess I was just curious what was the rationale for the credit facility that you signed, the five-year credit facility?.

Yes. It was – we were seeing these leases. You see the number of them this year. We did two more this quarter. We expect more in the fourth quarter.

And as you see the growth in those, there are some capital absorbed there and we wanted to make sure that we were providing our investors, our employees, our vendors comfort that we've got plenty of liquidity going forward. And so, we felt it prudent to get that in place at the time we could..

Okay. But you don't anticipate using it in the second couple of quarters.

It doesn't sound like…?.

No plans to draw on it. No plans to draw in it at all. It’s a comfort factor for everybody. We would get into some type of large leasing facility, we'd have to talk about that, but as it is right now we have no plans..

Okay. And then just the clarification, it looks like you're starting to call out related party sales of machines, is that because of the credit facility. Why do you have to call that out now? Thanks..

We saw the couple of machines earlier this year and it's both related to board members – couple of board members. And so we're called it out specifically in the footnote and we thought for clarity its best to have that provided to everyone, so everyone has all the information..

Okay. Thank you..

Thank you. Our next question is coming from Jason North of Jefferies. Please proceed with your question..

Looking at your guidance for 12 to 16 machine shipments here in Q4, I assume that this year the shipping rather than the recognition, so what is your thought in terms of the machines that we recognized as revenues in Q4?.

Yes, Jason. Good question. Those are shipments and so some of the shipments in Q4 will get recognize in Q4 and others will come out of our existing backlog of machines that were shipped already and that were already in backlog. So it will be a combination of two..

So, you think it will be 12 to 16 machines recognize as revenues in Q4, that's what you're saying?.

No. Shipped, no I did not say that. We will have enough to get to 40 million recognized, okay. Approximately 40 million recognized.

But we're providing shipping because we've got the information to be able to provide that in a relatively narrow band this year for this quarter, excuse me and so we're providing that to give you a sense of the adoption of our technology by our customers..

Okay. That makes sense.

And exiting Q2 you had 11 printers that had been shipped in that recognize as revenues, is that 13 exiting in Q3?.

Sorry, are you looking at the slide?.

You've given those commentary last time in terms of going through the math year to-date shipments versus revenue recognition as well as one in the backlog for once that have been shipped in 2014 but not recognized yet, I was trying to get updated number for that.?.

Shipped in 2014 and not recognized, that was your question is?.

The total number of printers that you have shipped, but not recognized as revenues as of the end of Q3?.

Okay. We've got on slide eight laid out shipped machines in 2015 and recognized machines in 2015. I think there was one that rolled from last quarter for the last year..

Okay.

So 13 is a good number there?.

Yes..

Okay.

And then looking at the….?.

Please remember that backlog also includes non-machine backlog not just machine..

Okay. And then, we were kind of tracking the progress here of Exerial.

Do you have the Exerial shipments and that's 12 to 16 number in Q4?.

We have no Exerials in that 12 to 16 in Q4. We shipped four earlier this year..

Do you take recognition for any of those in Q4 or is that still TBD [ph]?.

TBD [ph] on a daily basis..

And then for SG&A you said it was flat in Q4 that you see as a run rate and what kind of time frame is that you mean run rate in Q4 or should we think draw that into 2016 as well?.

Our G&A is generally higher in Q1 and Q2, it is lower in Q3 and Q4 and that's really more of the timing of the cycle of our G&A, our annual financial statements and audits and those types of things. .

Okay.

Do you generally see OpEx going for some [ph]?.

We are solidly in that you know we didn’t adjust that range; we are solidly within that range. You know that we provided the 21 to 23 days..

Okay.

And then based on the revenue trends you see, now are you thinking OpEx down or up for the next year?.

Really we are not going to give any guidance but I wouldn’t expect any significant increases..

All right. Thank you very much..

Thank you..

Thank you. Our next question is coming from Patrick Newton of Stifel. Please proceed with your question..

Hey, good morning thank you for taking my questions. A couple of house-keeping and it’s for Brian.

First is if we were to normalize earnings for the $4.4 million impairment, is there any associated tax impact and then now that you’ve given backlog and appointed backlog is been a key metric, could I bug you for backlog actually in 1Q'15 and 2Q'15?.

Good question on the goodwill, be it that we are in a NOL carry forward position, so it would get absorbed. Some portion of that but not a large portion of it is tax deductible, the rest is not tax deductible. So, but it’s not going to impact us due to our NOL carry forward.

At some point of time when we flip into a deferred, we recognize the income and we flip our deferred taxes into an asset position we would pick up some portion of it, probably in the neighborhood of $1.5 million or $2 million. What your second question? I’m sorry..

Quarterly, given that your point in the quarterly backlog now has been the key metric to monitor or your progress could be just that quarterly backlog with 1Q'15 and 2Q'15?.

We didn’t provide it for four -- we are not going to go back on it, I won’t tell you it’s been growing throughout the year. Again, we didn’t apply some of the controls and processes around those quarterly breaks and backlog and so I’m not going to kind of go back and try to reinvest the real..

Would then, will this be a metric that you will give to us on a go-forward basis?.

Yes, we will be providing it on a go-forward basis, because we do think it’s a key indicator. Again, when we started talking about shift machines last quarter everybody starting asking for it and we hadn’t prepared ourselves to be able to release it publicly. So we will continue to do that going forward then..

Okay. And then Kent, you spent quite a bit of time talking about you know [Indiscernible] challenges, can you talk about the challenges that are working with foreign entities, the challenges shipping, the weeks on the ocean etcetera.

I’m curious if we look at your revenue break down by region, you have 50% from the Americas, 35% from Asia then probably 5% from established entities, is that just a function that your backlog is much more slanted towards developing countries or you are having the same Revrack [ph] challenges in the Americas and Europe as well?.

You know the revenue recognitions; we are dealing with a new technology. And the accepted [Indiscernible] of this technology is a function of having a base of machines that are run and their customers have accepted them as being viable for their production capabilities. And so it’s a very very -- it’s a new issue for me.

I have to say that I never contemplated that I could spend as much time thinking about this subject. But I understand the nature of it why it exists, and you know in the scheme of accounting rule of the day, we just have to adjust our thinking about how we deal with it.

In my mind, I mean as an entrepreneur, if I collected the money and I am satisfying the customer when the revenue falls as much as it impacts those that are really focused on quarterly expectations that to me it’s not as important, because we’re going to win in the end.

We were-- right now we are taking a little hit for credibility and we are still -- and we are an emerging company, but we should run to it less as we get more of our machines out in the field that are repeatable and so we are having extended time periods right now of acceptance.

It’s not because the customers isn’t happy, it’s because we have made it damn sure that its running perfect because there is going to be follow on orders and those follow on orders won’t take nearly as long. So the technology -- some of these machines are doing new things.

And when they are buying it to new applications, then we are obligated to make sure that that actually works for them before we can consider it as revenue..

So Kent, the question was specifically on geography. I wouldn’t interpret your answer in that the Revrack [ph] you take orders across all geographies..

Yes I have to say so. I would say that the contracts with China and India can be a little bit more reflex because a complex just because of the nature of the way they think versus the way we think here in this country. But you know we’re overcoming it..

Okay. And then does -- of probably three or four quarters has been that you guys are laser focused on profitability, do you understand it has to be a possible entity unless I missed it, I don’t believe that profitability was mentioned at all in the prepared remarks or in the presentation.

I’m curious why that isn’t the focus in the near term and then if we think about that being a focus what is the timing or cadence that you think you know ExOne can begin to turn a profit?.

Okay, certainly we always started this year; we had stated that we wanted to get to a breakeven profitability this year. And that’s exclusive of any respects about this impairment charges. But on an operating basis we wanted to get there.

And we’ve missed that, but I frankly in terms of how you win the game again, I’m an entrepreneur and I got more money in the game than anybody. I believe that we can get to a profitable level in 2016. It’s all about getting big machines on the books and executed in a timely manner.

I don’t think we are going to see any other issues that are going to impact us; we are not going to buy our way to profitability with an acquisition or something. You know we’re got new opportunity we’ve got is very very large and we’re going to just stick to the focus of trying to make it happen.

And if we are here late in the scheme of things, it’s just the way that the game ended up playing out..

Okay. And then last one from me, Brian with the 22 and chain million of backlog and you’ll be coming off of the targeted $40 million revenue base in 2015.

It seems pretty reasonable that you guys could in 2016 achieve your kind of long term organic revenue growth be it 40% to 50% better?.

Yes that’s what we are targeting. And that’s what we would like to see. We like the backlog coming out of 930, albeit we would have like to recognize more, but we see growth and backlog continuing. So we’ve got additional orders this quarter so far, so we are looking at a strong backlog and how that’s going to help us..

The one issue of revenue recognition it is a pay me now or pay me later provided as long as you were successful with the customer. And so to the extent that it’s pay me later it does benefit 2016 opportunities to get to a profitable level..

Great.

And I’m sorry, I just saw one last one Brian on cash burn you are guiding for $20 million at the midpoint which would imply roughly flat cash flow from operations in the quarter, can you walk us through how given your revenue target that’s possible and how you are not going to draw that on that revolving credit facility?.

Yes, I mean when you run through those balance sheet changes as well as our profitability in the quarter you get to a fairly breakeven position for the quarter.

Again, CapEx was significantly down and will not impact us by any great extent; the CapEx in the current quarter will be namely a couple of machine that will try to move from an inventory into leasing transactions.

So it’s really the elimination of any kind of cash for CapEx stream as well as the higher revenues and continuing to collect on our customer prepayment..

Great. Thank you for taking my questions. Good luck..

Okay. Thank you..

Thank you. Our next question is coming from Julian Mitchell of Credit Suisse. Please proceed with your question..

Hi, this is Brian in for Julian this morning. To keep this short, as a follow up to your comments on industrial CapEx.

Have you seen any key installations from industrial customers as a result of the short cycle slump?.

Yes, we’ve seen pushback. We’ve seen push back, but not cancellation..

Okay.

And then now that we have backlog numbers, can you also think about backlog conversion in the more normalized macro environment? Would you expect the bill over the course of the year to be around 100% or would it be higher than that?.

I don’t think that we are holding off the company to be able to start putting metrics on the backlog. I mean there are orders that we are going to recognize the revenue going forward, that’s why we are giving it to you. The recognition of that backlog you know we’ve talked about three month, 15 months, we've talked about a whole bunch of terms there.

You know you can make an average and say its six months, but some of it is non-machine which will turn in much more quickly. And some of this machine, that will -- over a longer period of time depending on when that customer wants to take that machine or take that order or the timing of our customer side.

I can’t give you a metric on it, but I can tell you is like what we are trying to show you is its ability and it will be recognized as Kent said in the pay me later scenario that we will have revenue, stronger revenues going forward with that backlog..

Okay. Thank you..

Thank you..

Thank you. At this time I would like to turn the floor back over to management for any additional or closing comment..

Okay. Yes thank you again for joining us this morning. We are and still as you can see excited about the progress we are making even though it’s hard to communicate it in all of these time of trying to figure out how to get the big machines out of the door and delivered and finally accepted.

Our binder jetting capabilities are setting us apart as we said they would and we are getting more and more considerations from a lot of new customers and very very powerful customers in the industry. Our employees around the globe are still working hard, we thank them for all their efforts.

They are very enthusiastic about what we are experiencing as we line down 2015, it may have seen that this would be a more difficult year to plan but I think what we’ve tried to identify is that anything that didn’t happen here is rolling into 2016 which gives us a good start for 2016.

So thank you again and I’m sure we’ll be speaking with some of you from time to time here in the near future..

Ladies and gentlemen, thank you for your participation. This concludes today’s teleconference. You may disconnect your lines at this time and have a wonderful day..